taxes – LODGINGhttp://lodgingmagazine.com
Official Publication of AHLA. LODGING covers hotel news and hospitality industry stories.Thu, 24 May 2018 15:41:38 +0000en-UShourly1https://wordpress.org/?v=4.9.6Rising Real Estate Taxeshttp://lodgingmagazine.com/rising-real-estate-taxes/
http://lodgingmagazine.com/rising-real-estate-taxes/#respondFri, 06 Nov 2015 19:46:02 +0000http://lodgingmagazine.com/?p=21668It’s inevitable. Hotel real estate taxes will be going up because values are increasing. That means you need to figure out how much your property’s growing value might be hampered by increasing property taxes. A tax consultant who knows hotel assets and the local jurisdiction should be able to help you figure out your exposure. “Taxes are just one thing to look at,” says Steve Kirby, principal at Mumford Company. “If you wait a year ...

]]>It’s inevitable. Hotel real estate taxes will be going up because values are increasing. That means you need to figure out how much your property’s growing value might be hampered by increasing property taxes. A tax consultant who knows hotel assets and the local jurisdiction should be able to help you figure out your exposure.

“Taxes are just one thing to look at,” says Steve Kirby, principal at Mumford Company. “If you wait a year or two and the values start going down, your taxes will be lower but your recapture will be that much further in the future, which will only compound it.”

]]>http://lodgingmagazine.com/rising-real-estate-taxes/feed/0Booking Sites to Pay Chicago $29 Million in Taxeshttp://lodgingmagazine.com/booking-sites-to-pay-chicago-29-million-in-taxes/
http://lodgingmagazine.com/booking-sites-to-pay-chicago-29-million-in-taxes/#respondFri, 30 Oct 2015 14:34:10 +0000http://lodgingmagazine.com/?p=21496On Oct. 29, Chicago’s city council announced that they concluded a 10-year-old case against travel websites that offer discount rates. Expedia, Hotels.com, and Hotwire will pay the city $29 million, according to the Chicago Tribune. The cost is the amount of hotel taxes still owed by the companies that piled up between 2005 and 2014. During that span, websites were paying hotel taxes based on the amount they paid to hotel companies for the rooms, ...

]]>On Oct. 29, Chicago’s city council announced that they concluded a 10-year-old case against travel websites that offer discount rates. Expedia, Hotels.com, and Hotwire will pay the city $29 million, according to the Chicago Tribune.

The cost is the amount of hotel taxes still owed by the companies that piled up between 2005 and 2014. During that span, websites were paying hotel taxes based on the amount they paid to hotel companies for the rooms, not the markup they earned when selling to customers.

]]>http://lodgingmagazine.com/booking-sites-to-pay-chicago-29-million-in-taxes/feed/0How Tax Extensions and Regulations Will Impact Hotelshttp://lodgingmagazine.com/how-tax-extensions-and-regulations-will-impact-hotels/
http://lodgingmagazine.com/how-tax-extensions-and-regulations-will-impact-hotels/#respondWed, 11 Mar 2015 13:39:48 +0000http://lodgingmagazine.com/?p=17374There’s no easy way to say it—the lodging industry will likely face tax challenges in the next 12 months. The past year was fraught with congressional bickering, partisanship, gridlock, and, consequently, no passage of any major tax legislation. There was plenty of drama too, including the troubled rollout of the Affordable Care Act, congressional hearings over lost and retrieved IRS emails, and so-called corporate inversions, with U.S. companies acquiring foreign corporations, swapping headquarters, and reducing ...

]]>There’s no easy way to say it—the lodging industry will likely face tax challenges in the next 12 months. The past year was fraught with congressional bickering, partisanship, gridlock, and, consequently, no passage of any major tax legislation. There was plenty of drama too, including the troubled rollout of the Affordable Care Act, congressional hearings over lost and retrieved IRS emails, and so-called corporate inversions, with U.S. companies acquiring foreign corporations, swapping headquarters, and reducing their U.S. tax load. This was all capped off by a shift in control of the U.S. Senate after the midterm elections.

Through it all, Congress and the Obama Administration have talked about various fixes to the tax code, but reform has largely remained at the bottom of the to-do list. Now, the new head of the Senate Committee on Finance and the newly minted chairman of the House Committee of Ways & Means, say that tax reform is a top priority.

And at the insistence of the National Taxpayer Advocate, the IRS has recently adopted an official Taxpayer Bill of Rights. It’s not the Magna Carta but certainly a step in the right direction. As 2015 begins, the most important impact of 2014 will be the new rules that will affect tax compliance and tax return requirements, which either stem from the Tax Increase Prevention Act of 2014 (TIPA) or will be triggered by earlier legislation, rulings, and treasury regulations.

Affordable Care Act
Beginning Jan. 1, 2015, employers with at least 100 full-time (or equivalent) employees must offer affordable health coverage that provides a minimum value to these employees and their dependents. If not, the employer will be subject to an employer shared responsibility payment if at least one full-time employee receives a premium tax credit for purchasing coverage through one of the new Affordable Insurance Exchanges. Employers must offer coverage to at least 70 percent of full-time employees to avoid an assessable payment. For employers with 50 to 100 employees, the shared responsibility is deferred until 2016 if appropriate certifications are available, but the coverage percentage will increase to 95 percent. Also, for employer plan years beginning Jan. 1, 2014, and thereafter, the Affordable Care Act mandates that employee wait periods for coverage cannot exceed 90 days, including holidays and weekends, after an employee is otherwise eligible.

2015 is also the first year that individuals must carry minimum essential coverage or make a shared responsibility payment with their personal tax returns. The IRS has created a number of forms and instructions to carry out these rules, but it will likely be a challenging year for human resource and payroll departments, as well as for accountants.

Tax Extenders
TIPA was enacted in December 2014 to extend more than 50 popular—but temporary—tax incentives. These benefits will be applied retroactively through 2014 but have, unfortunately, been set to expire on Dec. 31. This means that these rules will not apply in 2015 without congressional and presidential action. Regardless of the act’s temporary nature, taxpayers will see benefits on their 2014 tax returns. Some incentives of keen interest to the hospitality industry include: 50 percent bonus depreciation, a 15-year write-off for qualified real estate investments, an increase to Section 179 expensing, an extension of the Work Opportunity Tax Credit, and an enhanced deduction for food inventory.

New Capitalization Rules
Last year was a busy one for the IRS in the capitalization arena, and the regulations that were passed will require much vigilance during the 2015 tax year and beyond. Final guidance was issued in many areas, in particular the rules regarding losses resulting from “partial dispositions” of property. IRS regulations generally affect all taxpayers that acquire, produce, or improve tangible property but especially impact lodging facilities, as these require continual upgrades, remodeling, and refreshes. Hospitality finance executives should be alert to the numerous elections required with 2014 tax returns.

IRS Guidance
On Dec. 23, 2014, the IRS accepted a request for guidance as part of its Industry Issue Resolution (IIR) program regarding capitalization rules for restaurants. The objective of the IIR program is to resolve common issues with a specific emphasis on the Unit of Property (UOP) rules, refresh and remodel expenses, and general maintenance and repair expenses.

The New Year
Overall, 2015 will be a challenging year for the hospitality industry. Hopefully, we will see comprehensive tax reform and tax incentives become permanent.

SOME HIGHLIGHTS OF THE NEW CAPITALIZATION RULES

De Minimis Safe Harbor
This allows a taxpayer to deduct amounts paid for tangible property if the costs are not greater than specific dollar amounts determined at the invoice or item level, if consistent with financial statements. The dollar threshold is $5,000 per invoice or per item as substantiated ($500 if there are no audited financial statements).

Overall Plan of Rehabilitation Doctrine Now Obsolete
The final regulations provide that indirect costs, such as repairs incurred during a period of renovation, do not need to be capitalized if not related to the capitalized improvement. The judicial doctrine that required all costs incurred as part of an overall plan of rehabilitation to be capitalized is obsolete.

New Annual Election
Small business taxpayers may elect a safe harbor for repairs, maintenance, and improvements to buildings, as long as eligible property does not exceed 2 percent of the unadjusted basis of the eligible building or $10,000, whichever is less.

Unit of Property Modification for Buildings
A taxpayer is now required to analyze improvement costs relative to eight building systems defined in the regulations to determine proper treatment. Material improvements to any of these systems will require capitalization, even though the cost may be small relative to the entire building.

Replacement of Major Components or Structural Parts of Buildings
This allows for a loss on the disposition or replacement of a major component of a building (e.g., a roof). Prior to final regulations, taxpayers were required to continue to depreciate items that had already been replaced.

Leo Parmegiani is a CPA and tax partner in the firm of PKF O’Connor Davies, a division of O’Connor Davies LLP, in New York City. www.odpkf.com

]]>http://lodgingmagazine.com/how-tax-extensions-and-regulations-will-impact-hotels/feed/0Bahamas Repeals Hotel Guest Taxhttp://lodgingmagazine.com/bahamas-repeals-hotel-guest-tax/
http://lodgingmagazine.com/bahamas-repeals-hotel-guest-tax/#respondMon, 05 Jan 2015 16:27:13 +0000http://lodgingmagazine.com/?p=16056In order to attract more visitors and increase their value for money, the government of The Bahamas has reduced hotel taxes. The Ministry of Finance, in conjunction with the Ministry of Tourism, repealed the Hotel Guest Tax of 10 percent and replaced it with a 7.5 percent Value Added Tax (VAT). The VAT will be charged on hotels and home rentals as well as all other services supplied to guests. VAT registrants must make provision ...

]]>In order to attract more visitors and increase their value for money, the government of The Bahamas has reduced hotel taxes. The Ministry of Finance, in conjunction with the Ministry of Tourism, repealed the Hotel Guest Tax of 10 percent and replaced it with a 7.5 percent Value Added Tax (VAT). The VAT will be charged on hotels and home rentals as well as all other services supplied to guests. VAT registrants must make provision to collect the tax for stays already booked for 2015, and any contract executed or reservation made after Aug. 31, 2014, is considered under the general transitional provision for VAT and as such will be presumed to have made provision for VAT for accommodations commencing on or after Jan. 1. The legislation is very strict as to who may charge and collect the VAT and only VAT registrants with a Tax Identification Number (TIN) displayed in the holiday accommodation will be allowed to collect the VAT.

]]>http://lodgingmagazine.com/bahamas-repeals-hotel-guest-tax/feed/0Lodging Industry Seeks Level Playing Field with OTAshttp://lodgingmagazine.com/lodging-industry-seeks-level-playing-field-with-otas/
http://lodgingmagazine.com/lodging-industry-seeks-level-playing-field-with-otas/#respondTue, 27 May 2014 15:06:21 +0000http://lodgingmagazine.com/?p=11764The travel and tourism industry, of which lodging is a significant component, is a key driver of the economy in Hawaii. In 2013, 33.9 percent of all jobs in the state were tied to the lodging industry, either directly or indirectly, and hotels, motels, resorts, and lodges generated $997.6 million in tax revenue for local and state governments. More importantly, the 285 lodging properties and 56,802 rooms in Hawaii are responsible for $1.9 billion in ...

]]>The travel and tourism industry, of which lodging is a significant component, is a key driver of the economy in Hawaii. In 2013, 33.9 percent of all jobs in the state were tied to the lodging industry, either directly or indirectly, and hotels, motels, resorts, and lodges generated $997.6 million in tax revenue for local and state governments. More importantly, the 285 lodging properties and 56,802 rooms in Hawaii are responsible for $1.9 billion in wages to the hardworking men and women in the state’s hotel industry. With every new job and every new hotel room, our industry is making a further investment in the people of Hawaii.

At present, the hotel industry in Hawaii finds itself on an uneven playing field with online travel companies, and the Hawaii Supreme Court is currently considering whether or not this disparity should stand. Hotels, many of which have a significant online booking presence through their own branded sites, are remitting the full taxes for online bookings to Hawaii, while online travel companies are not remitting full taxes for online bookings. That is because unlike hotels, online travel companies do not calculate local and state taxes on rooms based on the retail price charged to customers. Because of this disparity, hotels are subject to a higher effective tax rate than online travel companies for the same product.

We urge the Supreme Court of Hawaii to ensure fair and equal application of the law. The application of Hawaii’s general excise and transient tax laws, which are vital to the state’s tourism and infrastructure, should be applied fairly and equitably to hotels and online travel companies. Despite assertions to the contrary, having online travel companies remit taxes will not depress tourism in Hawaii. In fact, the reality points in the opposite direction—other states with enforced equitable remittance of taxes between hotels and online travel companies have since had an increase in tourism.

By not having to remit the full taxes for rooms booked online, online travel companies are receiving a dividend from the state of Hawaii while marketing many other locales in competition with Hawaii’s destinations. Contrast this to the significant investment hotels on the ground in Hawaii have made in the state, its infrastructure, and most importantly, its job market and community. Over the past several years, tourism in the state has been on an upward trajectory in large part thanks to the significant investments and marketing efforts by the hotel and lodging industry. In 2012, a total of 8.028 million visitors arrived by airline and cruise ship—a 10 percent increase over the 2011 totals and 1.01 million more than the number of visitors in 2010.

At its heart, this is not an issue of harming the travel and tourism industry—it is a matter of guaranteeing equal application of the state’s existing tax laws instead of picking winners and losers through unequal application of the law. The future of Hawaii’s hotel industry is very promising, and hotels are continuing to drive job creation and economic growth in the state. To continue this positive momentum, however, it is important that the hotel and lodging industry have the assurance that they will be operating on a level playing field with online travel companies. We urge the Supreme Court of Hawaii to make the decision that is right for the state and its tourism industry.

Katherine Lugar is president/CEO of the American Hotel & Lodging Association. Learn more at www.ahla.com.

]]>http://lodgingmagazine.com/lodging-industry-seeks-level-playing-field-with-otas/feed/0Wyoming Wins Battle Over Lodging Taxhttp://lodgingmagazine.com/wyoming-wins-battle-over-lodging-tax/
http://lodgingmagazine.com/wyoming-wins-battle-over-lodging-tax/#respondFri, 04 Apr 2014 13:55:54 +0000http://lodgingmagazine.com/?p=10720Online travel companies should remit sales and lodging tax on the full booking price of hotel rooms, The Wyoming Supreme Court ruled Thursday. According to the Wyoming Tribune Eagle, the ruling affirms a decision by State Board of Equalization in March 2013. That had been opposed by attorney Larry Wolfe, who represented seven online travel companies: Expedia, Travelocity, Priceline, Hotwire, Orbitz, CheapTickets, and Hotels.com. The companies had hoped to continue the practice of collecting and ...

]]>Online travel companies should remit sales and lodging tax on the full booking price of hotel rooms, The Wyoming Supreme Court ruled Thursday. According to the Wyoming Tribune Eagle, the ruling affirms a decision by State Board of Equalization in March 2013. That had been opposed by attorney Larry Wolfe, who represented seven online travel companies: Expedia, Travelocity, Priceline, Hotwire, Orbitz, CheapTickets, and Hotels.com. The companies had hoped to continue the practice of collecting and remitting taxes to the state based on the lower rates that they negotiate with the hotels instead of the higher prices offered to consumers. Dan Noble, director of the Department of Revenue, has said such practices are depriving the state of thousands, if not millions, of dollars in lost revenues. According to the Bureau of Labor Statistics, the Wyoming lodging industry is responsible for 11,378 jobs and $332 million in wages. As of July 2013, there were 392 lodging properties across the state, comprised of 26,381 rooms. STR reports that total tax revenue generated by the state’s lodging industry in 2012 was $119.8 million. Read more over at WyomingNews.com.

]]>http://lodgingmagazine.com/wyoming-wins-battle-over-lodging-tax/feed/0Airbnb To Collect Hotel Taxes for San Franciscohttp://lodgingmagazine.com/airbnb-to-collect-hotel-taxes-for-san-francisco/
http://lodgingmagazine.com/airbnb-to-collect-hotel-taxes-for-san-francisco/#respondTue, 01 Apr 2014 14:47:27 +0000http://lodgingmagazine.com/?p=10575Following its offer to collect and pay $21 million in taxes in New York City and a smaller initiative in Portland, Airbnb has agreed to pay the San Francisco’s 14 percent hotel tax by the summer. The move could potentially add millions to city coffers and help Airbnb avoid conflict with regulators, according to this article from SFGate. Under the plan, Airbnb would collect and remit to the city taxes that originate directly from guests as ...

]]>Following its offer to collect and pay $21 million in taxes in New York City and a smaller initiative in Portland, Airbnb has agreed to pay the San Francisco’s 14 percent hotel tax by the summer. The move could potentially add millions to city coffers and help Airbnb avoid conflict with regulators, according to this article from SFGate. Under the plan, Airbnb would collect and remit to the city taxes that originate directly from guests as an extra charge on their bill, the same way that hotels collect them, the article says. For example, a guest staying in a $100-per-night Airbnb room would pay an extra $14 a night. Out of the 32,000 cities worldwide where Airbnb operates, San Francisco and Portland, Ore., would be the first ones where it collects hotel taxes. Read more at SFGate.

]]>http://lodgingmagazine.com/airbnb-to-collect-hotel-taxes-for-san-francisco/feed/0New Orleans Hotels Approve Room-Tax Hikehttp://lodgingmagazine.com/new-orleans-hotels-approve-room-tax-hike/
http://lodgingmagazine.com/new-orleans-hotels-approve-room-tax-hike/#respondFri, 28 Feb 2014 16:09:36 +0000http://lodgingmagazine.com/?p=9824Last year in Louisiana, a state law was passed that would allow for New Orleans hotels to impose a new 1.75 percent room charge to generate more revenue for tourism promotion. In order to pass, the law required representatives of more than two-thirds of the downtown hotels to vote in favor of it. And according to this report from the The Times-Picayune, 95 percent voted in favor of the law, and the new charge will ...

]]>Last year in Louisiana, a state law was passed that would allow for New Orleans hotels to impose a new 1.75 percent room charge to generate more revenue for tourism promotion. In order to pass, the law required representatives of more than two-thirds of the downtown hotels to vote in favor of it.

The number of votes given to each hotel was determined by the number of rooms at each property. The charge will apply in all New Orleans Convention and Visitors Bureau-member hotels except those in eastern New Orleans.

According to the report, the convention bureau will collect .75 percent of the assessment to promote the city as a convention venue, step up international marketing, and seek to attract increased air travel service to New Orleans. The tourism corporation will take .75 percent for domestic tourism marketing. The remaining .25 percent will go to city government for French Quarter infrastructure repairs and public safety.

]]>Washington, D.C.—In an effort to push for legislation to protect Pennsylvania hotels from being subjected to higher effective tax rates than out-of-state online travel companies (OTCs), the American Hotel and Lodging Association (AH&LA) will testify at the October 29 field hearing of the Pennsylvania House Committee on Tourism & Recreational Development, convened by Representatives Jerry Stern (R-80) Thaddeus Kirkland (D-159).

Shawn McBurney, AH&LA senior vice president of governmental affairs, will speak before the committee at the hearing, “Online Travel Services.” Members will discuss five bills currently pending review with the committee that would:

Amend Title 53 of the Pennsylvania Consolidated Statutes to further provide for excise tax on hotel room rental (HB 871);

Amend the Tax Reform Code of 1971 to further provide for definitions (HB 872);

Amend the County Code of 1951 to further provide for authorization of certain hotel room rental taxes; and, in grounds and buildings, further provide for certain hotel room rental taxes (HB 873);

Amend the Community and Economic Improvement Act of 1998 to further provide for definitions relating to tourism and marketing tax (HB 874); and

Amend Title 64 of the Pennsylvania Consolidated Statutes to further provide for hotel room rental tax and the continuation of existing tax (HB 875).

Because rooms booked through hotel channels are subject to taxes on the retail rate but OTCs have exploited the lack of clarity in Pennsylvania’s existing laws, two different types of tax treatment exist for identical transactions. As a result, Pennsylvania hotels are discriminated against with higher effective tax rates and an uneven playing field that gives out-of-state OTCs a tax preference.

“Over the past few years, state and local governments across the country are taking steps to ensure hotels are given a level playing field in their tax rates versus those assessed to out-of-state competitors,” said Katherine Lugar, AH&LA president and CEO. “Here in Philadelphia, actions have been taken to recover revenue from these out-of-state companies that they claim as profit but the city asserted were instead taxes they collected and should have remitted to state coffers. We commend Chairman Stern and Democratic Chair Kirkland for holding this hearing and taking a careful look at the impacts of the OTCs’ controversial practice on the Pennsylvania lodging industry.”

According to 2011 statistics compiled by the Bureau of Economic Analysis, the Pennsylvania lodging industry is responsible for 51,857 jobs and $1.544 billion in wages. As of July 2013, there were 1,392 lodging properties across Pennsylvania, comprised of 132,639 rooms. Smith Travel Research (STR) reports that total room revenue generated by the state’s lodging industry in 2012 was $3.141 billion.

]]>http://lodgingmagazine.com/ahla-urges-pennsylvania-to-enforceme-tax-laws-equally/feed/0Taxes and the Deficithttp://lodgingmagazine.com/taxes-and-the-deficit/
http://lodgingmagazine.com/taxes-and-the-deficit/#respondTue, 10 Apr 2012 15:59:36 +0000http://8ff59bd3-4ee5-49fa-ab46-7bebee0c96b7Normally, this column is supposed to cover the tax changes over the prior year and how they impact the hospitality industry. Last year, we commented about how 2010 was an interesting year but little had passed in the tax field. 2010 was all about health care reform, the change in control of the House, and the rise of the Tea Party. It was a very political and partisan year. If anything, 2011 was worse. Never ...

]]>Normally, this column is supposed to cover the tax changes over the prior year and how they impact the hospitality industry. Last year, we commented about how 2010 was an interesting year but little had passed in the tax field. 2010 was all about health care reform, the change in control of the House, and the rise of the Tea Party. It was a very political and partisan year.

If anything, 2011 was worse. Never has so little been accomplished by so many. Brinkmanship was the key word for 2011. It will be known more for what did not occur rather than what did. It is not unusual for partisan politics to take center stage in an election year. While 2011 was not, the race for the Presidency and control of the House and Senate began before all the winners from 2010 were known.

Two major issues were pre-eminent during 2011. The first was the size of the deficit. To agree to an extension of the debt limit, the House (mainly the newly elected members) required substantial reductions but as a compromise, left it up to a House/Senate committee to recommend the cuts. Proposals were put forward to cut billions in spending while at the same time raising taxes. The “reform of the tax system” was not accomplished. As a result, automatic spending cuts of $1.2 trillion over 10 years are to be made. In addition, without some action, the Bush tax cuts will expire at the end of 2012, resulting in substantial tax increases for 2013.

The other issue was the extension of the temporary Social Security tax cut. For 2011, the employee share of Social Security tax was reduced from 6.2 percent to 4.2 percent. Similar reductions were made for the self-employed. However, Congress and the President were unable to agree on a method to pay to extend the benefit for the 2012 tax year. Not to be viewed as the Grinch, right before Christmas an agreement was reached to extend the tax break for the first two months of 2012.

After the New Year, the President again raised the issue of extending the break for the rest of 2012. He proposed the same method of paying for it that had previously been shot down by the Republicans. However, in a surprise move on Feb. 13, the Republicans said they would not require this tax break to be offset with spending cuts. They realized that fighting this battle was a losing cause with the American people. As a result, the Social Security tax-withholding rate for employees will remain at 4.2 percent for the remainder of the year.

HOSPITALITY TAX ISSUES
Several tax issues are important for those in the hospitality industry. The IRS has established a Voluntary Classification Settlement Program (VCSP). This program will enable employers to voluntarily re-class workers for federal employment tax purposes and take advantage of audit protection and a reduced penalty framework. The VCSP is open to taxpayers currently treating their workers as independent contractors. The IRS continues its emphasis on foreign assets held by U.S. taxpayers, including additional information reporting by both taxpayers and foreign financial institutions. The penalties are severe and enforcement is active. Two provisions that passed at the end of 2010 will have an impact on the industry. They are:

– 50 percent bonus depreciation allowance for property placed in service during 2012

– Increasing the maximum expense deduction to $125,000 and setting the phase out amount at $500,000 for years beginning after Dec. 31, 2011

The President issued his budget blueprint in February 2012. The Republicans announced it dead and the Democrats see no need to pass a budget for the year. It is not expected to move forward but it does contain several tax provisions. The biggest is the expiration of the tax cuts and a minimum tax rate on all income of 30 percent for those earning more than $1 million (the so-called Buffet tax). On Feb. 22, the White House and the Department of Treasury released the President’s framework for business tax reform. Among the key elements were eliminating dozens of tax loopholes and subsidies, broadening the base, and lowering the corporate tax rate to 28 percent to spur growth in America; and simplifying and cutting taxes for America’s small businesses. Although in an election year it is unlikely substantive tax legislation will pass, it is hoped that some bills impacting the hospitality industry will pass.

DEFICIT AND DEBT
Regardless of your political leanings, the size of the deficit and the federal debt are of concern. Because of politics, the raising of the debt limit has changed from something done on a regular basis to political chicken, with the realistic potential for a U.S. default during the 2011 discussions.

While we have been in a recession over the last few years, the size of the deficit rivals that from World War II. How will the deficit play out until 2022?

Unfortunately, the Congressional Budget Office analysis is based on the law as it reads today. As such, it projects a rosy scenario with the deficit dropping to 1.5 percent of Gross Domestic Product. However, it is unlikely that all the automatic cuts will be made since so many of them relate to defense spending. Also, it appears unlikely that the Bush tax cuts will be allowed to expire in their entirety. As a result, the alternative scenario could occur, which is unsustainable.

There is no easy solution. Too much of our budget is in entitlements, defense spending, and interest on the debt. Without an increase in revenue, or the political courage to address entitlements, the problem will grow exponentially. The election cycle is continuous. The budget of the President and posturing of Congress are nothing more than election year politics. Both political parties already are geared up for elections so many of the hard decisions will not be made and the buck will be passed to the next Congress or even the next generation.

Kevin Reilly, an attorney and CPA, is a member of the firm of Witt Mares. Witt Mares is a member of PKF International Ltd, an association of legally independent member firms. He heads up the hospitality practice for the Fairfax, Va.-based firm.